Q&A: Can A Retired Person Qualify For A Home Mortgage?

A: The good news is that Federal law makes it illegal to deny a loan just because of someone’s age. The Fair Housing Act of 1968 protects elderly people from unfair bias when applying for a home loan.

Lenders allow retirement income when they approve mortgages. Borrowers must provide the retirement award letter and proof of continuance for three years. Borrowers with pensions will be required to provide a letter from the pension administrator stating if the pension is guaranteed for life or for only for a certain amount of time. Most government pensions provide benefits for life. Other pensions may provide options that are not guaranteed for life.

Social Security is available to most retirees starting at age 62. The federal government will tax social security when other income exceeds preset guidelines. Many lenders will gross up Social Security income by 125 percent if all of it is non-taxable. If you receive $2,000 of Social Security and it is not taxable by the IRS, then the lender may, at their discretion, qualify you with $2,500 of income.

So, as a retired person, you actually have a slight advantage over working folks at a 9-5 job. Also, the majority of consumers over 65 have really good credit and very little debt. This is recognized by the loan underwriter and taken into consideration when figuring out the max debt-to-income ratio.

Give it a try.

– Lee Dworshak, REALTOR®, Keller Williams LA Harbor Realty

A: I have a retired buyer right now that I’m working with. He has a solid, regular pension coming in which the mortgage broker said qualifies him for a mortgage.

I’d recommend contacting your local banker, or a mortgage broker in your area and giving him your information. You may be pleasantly surprised! The one issue he faced was not having any established credit already. He came from the wonderful generation that didn’t believe in buying things when he couldn’t afford it – so he’d never had any credit cards, etc. The mortgage people he spoke with were able to help him establish credit in a careful, planned way in order to satisfy the rest of the qualifications for the mortgage.